Finances in the Animal Finances in the Animal Science IndustryScience Industry

What kinds of records should businesses keep?

• Assets

• Liabilities

• Net worth

• Profit and loss statement

• Cash receipts

• Non-cash receipts

• Invoice

Assets

• Things that one owns and completely pays for

• Tangible in value– Example: A car after all payments have been

made.

• Two types of assets– Current and non-current

Assets

Current Assets• Items quickly converted to cash or that will be

sold within 12 months– cash– checking– savings– stocks or bonds– non-depreciable inventory of crops and

livestock

Assets

Non-current Assets

• Items that have a useful life or more than one year– land– machinery– breeding livestock

Liabilities

• Things that you owe money to other people for or debts– Example: credit cards

Liabilities

• Current-debts that are due to be paid this year– fertilizer and feed bills– tractor and building payments– part of the mortgage due this year

• Non-Current-debts not due this year– mortgages not due this year

Net Worth

• Total assets minus total liabilities.

• Current Assets + Non-Current Assets=Total Assets

• Current Liabilities + Non-Current Liabilities=Total Liabilities

Inventory

• An itemized list of things owned by a business with the beginning value and depreciated value

• Two types of inventory– Non-depreciable– Depreciable

Inventory

• Non-depreciable-items that will be used or sold within a year– feed– supplies

• Depreciable-items that have a useful life of more than one year and lose value because of age, wear or becoming out-of date because of technology advancements.

Inventory

• Land is NOT depreciable property

• Depreciable property examples:– tractor– computer– chainsaw

Profit and Loss Statement

• A financial statement of a business that reports the profit made by the business or the losses incurred.

Receipts

• Cash Receipts– Cash that is paid for services or merchandise.

• Non-Cash Receipts– Payment for services in other ways than cash.

• Food

• Services

• Gifts

Invoice

• Shows items and prices for things that have been bought from a certain business.

Debt-to-Equity Ratio

• Used by banks and lending institutions to decide whether or not to lend money to specific people or businesses

Debt-to-Equity Ratio = Total Liability

Net Worth

Pop Quiz

1. If a beef farmer has 200 head of cow valued at $400 each, 20 tons of feed worth $200 per ton, 2 tractors worth $50,000 each, a manure spreader worth $4,000, and 10 acres of land worth $5,000 per acre, what amount should be entered on the total value of non-depreciable items line of the inventory page?

Pop Quiz

2. A swine farmer has current assets listed at $30,000 and non-current assets listed at $150,000, he also has current liabilities listed at $10,000 and non-current liabilities listed at $50,000. Calculated the farmer’s net worth.